IB Final

The _____ is primarily responsible for policing the world trading system and making sure nation-states adhere to rules laid down in trade treaties signed by member states

World Trade Organization

WTO stands for

World Trade Organization

Many American firms that sold oil-refining technology to firms in the Gulf now find themselves competing with these firms in the world oil market. This is an example of:

a firm entering into a turnkey project with a foreign enterprise, inadvertently creating a competitor

Miranda is a cultural relativist, which means she likely believes

a firm should adopt the ethics of the culture in which it is operating

_____ seeks the best people for key jobs throughout the organization, regardless of nationality.

a geocentric staffing policy

____ strategy customizes the product offering to local demands and increases the value of that product in the local market

a localization

According to the chapter 6 (International Trade Theory), a country has an _____________ _________________ in the production of a product when it is more efficient than any other country at producing it.

absolute advantage

If the spot rate is $1 = 120, and the 30-day forward rate is $1 = ×130, the dollar is selling at a discount in the forward market.

alse

If a firm is trying to enter a market where there are already well-established companies, and where global competitors are also interested in establishing a presence, the firm should choose

an acquisition

A firm with _____ staffing policy will fill all key management positions with parent-country nationals.

an ethnocentric

Many firms pursuing _____ pricing strategy on an international scale will price low worldwide in attempting to build global sales volume as rapidly as possible, even if this means taking large losses initially.

an experience curve

Cross-cultural literacy refers to

an understanding of how cultural differences can affect business

A ____ crisis refers to a loss of confidence in the banking system that leads to a run on banks as individuals and companies withdraw their deposits

banking

_____ are the accepted principles of right or wrong governing the conduct of businesspeople.

business ethics

_____ is a technique financial managers use to try to quantify the benefits, costs, and risk of an investment.

capital budgeting

Which of the following is a closed system of stratification in which social position is determined by the family into which a person is born, and change in that position is usually not possible during an individual's lifetime?

caste system

An upper-middle-class manager tends to have hostile relationships with the working-class employees in the firm because of his tendency to perceive himself as superior to them based on his class background. In this example, the manager exhibits

class consciousness

A condition where people tend to perceive themselves in terms of their class background and this shapes their relationships with members of other classes is known as

class consiousness

When _____ is emphasized, an individual's right to do something may be restricted on the grounds that it runs counter to "the good of society."

collectivism

In a ______ economy, the government plans the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold

command

A ____ market has no barriers to trade among member countries

common

According to the _____ point of view, a firm should adopt the ethics of the culture in which it is operating

cultural relativism

Which level of economic integration eliminates trade barriers between member countries and adopts a common external trade policy?

customs union

Which of the following are more conducive to economic growth?

democratic regimes

______ involves removing legal restrictions to the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate

deregulation

To overcome cultural barriers, companies should

develop cross-cultural literacy

the role of IMF is to avoid the repetition of a global economic chaos through a combination of __________ and ___________

discipline and flexibility

what will help a company hedge against currency fluctuations?

dispersing production to different geographic locations

In theory, WTO rules should ensure that a free trade agreement

does not result in trade diversion

_____ occurs whenever a firm sells a product for a price that is less than the cost of producing it.

dumping

_____ exposure is the extent to which a firm's future international earning power is affected by changes in exchange rates

economic

a market economy encourages innovation because

economic freedom leads to greater incentives for innovation

When unit costs reductions associated with a large scale of output happens, it is called ___________________________ ____ ___________________.

economies of scale

Logistics is the activity that controls the

effective flows of physical materials through the value chain

Josiah was managing a factory in India and had a decision to make. The factory used child labor, which he disapproved of, but he knew the families of these children might starve without their income. This situation, in which none of the available alternatives seems morally acceptable, is called

ethical dilemma

An _________________ staffing policy is one in which all key management positions are filled by parent-country nations.

ethnocentric

what is a common underlying cause of finacial crisis?

excessive expansion of domestic borrowing

the rate at which one currency is converted into another is known as the

exchange rate

falling demand for US dollars and rising demand for euros translated into a ____ in the value of the dollar against the euro

fall

A country has an absolute advantage in the production of a product when it is less efficient than any other country in producing it.

false

A firm's organizational culture refers to the values and norms that are shared among employees of an organization and those outside the organization.

false

A manager from the United States is sent to Nigeria to supervise the construction of a road. As a righteous moralist, he is likely to learn the ethics and values of Nigeria and follow them, even if they don't concur with his own.

false

A tax haven is a country that gives income tax exemptions to firms that export all or part of its products.

false

According to supporters of free trade, as countries get richer they commit greater violation of environmental and labor regulations.

false

According to the new trade theory, firms that establish a second-mover advantage with regard to the production of a particular new product may subsequently dominate global trade in that product.

false

Adopting a pegged exchange rate regime increases the inflationary pressures in a country.

false

Because of its individualistic mind-set, Japanese culture is more supportive of entrepreneurial activities than American culture.

false

Democracy is a form of government that prohibits opposing political parties.

false

Firms cannot utilize the forward exchange market when they are faced with uncertainty about the future value of currencies.

false

GDP allows a more direct comparison of living standards in different countries than other measures.

false

Greenfield ventures are more risky than acquisitions in the sense that there is less potential for unpleasant surprises

false

Heckscher-Ohlin theory does not support the case for unrestricted free trade between nations.

false

Hofstede's study found that in masculine cultures, sex roles were less sharply distinguished, and little differentiation was made between men and women in the same job.

false

If the spot exchange rate is £1 = $1.50 when the market opens, and £1 = $1.48 at the end of the day, the pound has appreciated, and the dollar has depreciated.

false

In a concentrated retail system, there are many retailers, none of which has a significant share of the market.

false

Managers in a source factory operate in essentially the same way that managers in an offshore factory operate. They have very little say in purchasing or logistics decisions

false

Markets can be segmented in only one way—by sociocultural factors.

false

Moral hazard arises when people behave recklessly without regard for consequences

false

Norms are abstract ideas about what a group believes to be good, right, and desirable.

false

Outsourcing is a process that is limited to manufacturing enterprises

false

Porter's theory of national competitive advantage recommends unrestricted free trade between countries.

false

Products do not sell well when their attributes match consumer needs.

false

Since its establishment, the euro has had a stable trading history.

false

The Republic of Elbow has a command economy, and as such, its objective is to encourage free and fair competition between private producers.

false

The communists believed that socialism could be achieved by democratic means, and turned their backs on violent revolution and dictatorship.

false

The ethical obligations of a multinational corporation toward employment conditions, human rights, environmental pollution, and the use of power are always clear-cut.

false

The geocentric approach is the most popular because it is the least expensive to implement.

false

The most popular staffing policy is the ethnocentric approach.

false

The structure of market segments may not differ significantly from country to country.

false

The term social strata refers to the extent to which individuals can move out of the strata into which they were born.

false

To foster ethical behavior, many businesses draft a code of ethics, which is an informal statement of the ethical priorities the company follows.

false

When consumer tastes and preferences differ significantly between countries, there is low pressure for local responsiveness.

false

World Bank gives an aid of 100 million dollars to Kenya for creating rural health care facilities. This is an example of foreign direct investment.

false

XYZ Toys manufactures and sells small quantities of each of its products, but it can still benefit from economies of scale

false

a country with a well-functioning market economy does not need laws protecting private property rights and providing mechanisms for contract enforcement

false

a wholly owned subsidiary limits a firm's control over marketing a sales in different countries

false

according to Porter, the way to create superior value is to drive up the cost structure of the business and/or differentiate the product in some way so that consumers value it more

false

fixed exchange rates lead to speculation and uncertainty in the value of currencies

false

franchising does not enable a firm to quickly build a global presence

false

in a command economy, the prices are determined by the free interplay of demand and supply

false

in a totalitarian country, there are safeguards to protect an individual's right to freedom of expression, opinion, and organization

false

logistics includes the buying of raw materials and component parts

false

six sigma is a qualitative alternative to total quality management that focuses primarily on managing human resources to improve profitability

false

the IMF does not expect governments to meet any obligations except to pay back the money it borrows

false

the central message of collectivism is that individual economic and political freedoms are the ground rules on which a society should be based

false

the globalization of the world economy has resulted in a relative increase in the dominance of US firms in the global marketplace

false

the impact of currency exchange rates on the reported financial statements of a company is called economic exposure

false

the most typical joint venture is a 60-40, in which one party holds most of the ownership stake

false

the purchasing power parity theory is a strong predictor of short-run movements in exchange rates covering time spans of five years or less

false

totalitarian states promote human freedom and human development, which facilitates economic progress

false

A Japanese firm prefers expatriate Japanese managers to head its foreign operations because these managers have been socialized into the firm while employed in Japan. This indicates that the firm

follows an ethnocentric staffing policy to maintain a unified corporate culture

a ______ crisis is a situation in which a country cannot service its foreign debt obligations whether private-sector or government debt

foreign debt

FDI stands for

foreign direct investment

the G20 was originally established to

formulate a coordinated policy response to financial crises in developing nations

____ are exchange rates governing some specific future date foreign exchange transactions

forward exchange rates

_____ refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country.

free trade

from lease integrated to most integrated, the levels of economic integration are a:

free trade, customs union, common market, economic union, and political union

_____ refers to the shift toward a more integrated and interdependent world economy

globalization

Firms entering markets where there are no incumbent competitors to be acquired should choose:

greenfield investments

products such as pharmaceuticals have

high value-to-weight ratios

which of the following is a consequence of globalization?

increasing outsourcing of services

In a ______ society, the welfare of society is best served by letting people pursue their own economic self-interest

individualist

For firms selling a product that serves universal needs, and do not face significant competition, a(n) _____ strategy makes sense.

international

the most important disadvantage of _____ is that it is generally the most costly method of serving a foreign market from a capital investment standpoint

international

In countries such as the United States and Britain, firms typically raised capital by

issuing stock or bonds to investors

contracting out manufacturing allows companies to reduce economic exposure because

it allows companies to shift suppliers from country to country

which of the following is a disadvantage of licensing?

it does not give a firm the tight control over strategy that is required for realizing experience curve and location economies

Which of the following is a major benefit of engaging in free trade?

it gives countries access to products that they can produce

Why doesn't Great Britain use the euro as its national currency?

it would have to relinquish control of its monetary policy to the EU

firms entering a market via a ____ must bear only half of the costs and risks associated with the venture

joint venture

One advantage of ______ is that the firm benefits from a local partner's knowledge of the host country's competitive conditions, culture, language, political systems, and business

joint ventures

What is an accounting problem that only international businesses face?

lack of consistency in the accounting standards

____ allows the company to produce a wider variety of end products at a unit cost that at one time could be achieved only through the mass production of a standardization output

lean production

________ effects refer to cost savings that come from learning by doing

learning

One disadvantage of _____ is that it does not give a firm the tight control over manufacturing marketing and strategy that is required for realizing experience curve and location economies

licensing

Which of the following is a characteristic of a command economy?

limited international trade

What strategy focuses on increasing profitability by customizing the firm's goods or services so they provide a good match to tastes and preferences in different national markets?

localization strategy

Economies that arise from performing a value creation activity in the optimal place for that activity are referred to as:

location economies

The World Trade Organization promotes

lowering of barriers to cross-border trade and investment

In a _____, any individual who has an innovative idea is free to try to make money out of that idea by starting a business

market economy

The economic freedom associated with a _____ creates greater incentives for innovation and entrepreneurship than either a planned or mixed economy

market economy

__________ refers to identifying distinct groups of consumers whose needs, wants, and purchasing behavior differ from others in important ways.

market segmentation

Hofstede's masculinity versus femininity dimension looked at the relationship between gender and work roles and found that in

masculine cultures, sex roles were sharply differentiated, and traditional "masculine values" determined cultural ideals.

_____ supports the idea that countries should export more than they import.

mercantilism

the level of output at which most plant level scale economies are exhausted is referred to as the

minimum efficient scale of output

_____ pricing refers to the fact that a firm's pricing strategy in one market may have an impact on its rivals' pricing strategy in another market.

multipoint

which of the following factors hinders globalization of consumer goods market?

national differences in tastes and preferences

Culture is

not static

An exchange rate of €1 = $1.30 indicates that:

one euro buys 1.30 dollars.

Values and norms that are shared among employees of an organization refers to __________________ ______________.

organization culture

a factory that is viewed as an intelligence-gathering unit is called a _______ factory

outpost

a _____ exchange rate happens when the value of currency is fixed relative to a reference currency

pegged

which of the following products will most likely have high value-to-weight ratios?

pharmaceuticals

In a ____, the state owns all means of production

planned economy

______ risk is the likelihood that political forces will cause drastic changes in a country's business environment that adversely affect the profit and other goals of a business enterprise

political

Interdependent political, economic, and legal systems of a country make up its

political economy

a _______ staffing policy requires host-country nationals to be recruited to manage subsidiaries, while parent-country nationals occupy key positions at corporate headquarters

polycentric

The theory of comparative advantage suggests that trade is a _____ game in which all countries that participate realize economic gains.

positive-sum

_______ pricing is the use of price as a competitive weapon to drive weaker competitors out of a national market.

predatory

Apple exports its products to many countries. An advantage of exporting products to another country is that it

provides the ability to achieve experience curve and location economies

A _____ strategy is generally favored by consumer goods firms that are trying to sell to a large segment of the market.

pull

The _____ adjustment allows for a more direct comparison of living standards in different countries

purchasing power parity

in the face of unpredictable movements in exchange rates, businesses shouls

pursue strategies that will reduce economic exposure

When a company emphasizes personal selling, the company is probably using a ________ strategy.

push

Channel ________ refers to the expertise, competencies, and skills of established retailers in a nation, and their ability to sell and support the products of international businesses.

quality

Which of the following is not one of the four elements that constitute a firm's marketing mix?

reverse engineering

an advantage of forming a strategic alliance is that it helps firms

share the risks of developing new products or processes

The idea that businesspeople should consider the social consequences of economic actions when making business decisions and that there should be a presumption in favor of decisions that have both good economic and social consequences is known as

social responsibility

A currency ____ totally involves the short-term movement of funds from one currency to another in hopes of profiting from shifts in exchange rates, move freely among members

speculation

Currency ________ typically involves the short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates.

speculation

_____ are reported on a real-time basis on many financial websites and are continually changing - their value being determined by supply and demand for that currency relative to others

spot exchange rates

Which policy is mainly concerned with the selection of employees for particular jobs?

staffing policy

A firm's ______ are individuals or groups have an interest, claim, or stake in the company, in what it does, and in how well it performs

stakeholders

_____ are the most important source of external capital for business enterprises in the United States.

stocks or bonds

a pair of shoes costs 40 pounds in Britain. an identical pair costs $50 in the US when the exchange rate is 1 pound = $1.50. Which of the following is correct?

the United States offers a better deal

Hofstede's uncertainty avoidance dimension considered

the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty.

Expatriate failure refers to

the premature return of an expatriate manager to his or her home country

which of the following is a reason Turkey is not yet a member of the EU?

there are concerns over human rights issues in the country

International _____ occurs when a firm exports goods or services to consumers in another country

trade

____ occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area

trade creation

what arguement strengthens the idea of floating exchange rates?

trade deficits can be corrected through changes in exchange rates

_____ costs are the cost of exchange

transaction

______ exposure is the extent to which the income from individual transactions is affected by fluctuations in foreign exchange values

transaction

A firm that is pursuing a(n) _____ strategy is simultaneously trying to achieve low costs through location economies, economies of scale, and learning effects, and trying to differentiate its product offering across geographic markets.

transnational

A benefit to companies of economic integration is the opportunity to centralize their production and reduce costs

true

A caste system is a rigid form of social stratification in which the position a person has by birth cannot be changed through his or her own achievements or luck.

true

A firm that adopts an ethnocentric approach to staffing is likely to suffer from cultural myopia.

true

According to critics of globalization, today's interdependent global economy limits a nation's national sovereignty.

true

Accounting information is the means by which firms communicate their financial position to the providers of capital.

true

Accounting standards are rules for preparing financial statements.

true

An executive who performs well in a domestic setting may not be able to adapt to managing in a different cultural setting.

true

An expatriate manager is a citizen of one country who is working abroad in one of the firm's subsidiaries.

true

Apple's iPhone was unique when it first came out, with many features that no other phones had. As such, it enjoyed great success and dominated the cell phone market. This demonstrates the first-mover advantage.

true

Both Hindus and Buddhists stress the afterlife and spiritual achievement rather than involvement in this world.

true

Capital budgeting is the technique financial managers use to try to quantify the benefits, costs, and risks of an investment.

true

Cultural myopia refers to a firm's failure to understand host-country cultural differences that require different approaches to marketing and management.

true

Cultural toughness refers to the relationship between the country of assignment and how well an expatriate adjusts to a particular posting.

true

Ethical dilemmas are situations in which none of the available alternatives seems ethically acceptable

true

Exporting from a firm's home base is most appropriate when lower-cost locations for manufacturing the product can be found abroad.

true

Factor endowments refer to the extent to which a country is gifted with such resources as land, labor, and capital.

true

Firms based in well-developed nations tend to build a lot of extra performance attributes into their products.

true

Globalization of production can help companies lower their overall cost structure or improve the quality or functionality of their product offering

true

If a firm's core competence is proprietary technological knowledge, a joint venture is preferable.

true

If the law of one price were true for all goods and services, the purchasing power parity (PPP) exchange rate could be found from any individual set of prices.

true

The efficient market school argues that investing in exchange rate forecasting services would be a waste of money

true

The set of choices the firm offers to its targeted markets is known as the marketing mix.

true

Threats of protectionism, economic nationalism, and local content rules dictate that international businesses manufacture locally.

true

a firm's strategy can be defined as the actions that managers take to attain the goals of the firm

true

a key benefit resulting from the adoption of the euro is the ability to compare prices across member markets

true

a regional free trade agreement will benefit the world only when the amount of trade it creates exceeds the amount of trade it diverts

true

a theocratic law system is one in which the law is based on religious teachings

true

according to globalization critics, the decline in unskilled wage rates is due to the migration of low-wage manufacturing jobs offshore and a corresponding reduction in demand for unskilled workers

true

for privatization to work, it must also be accompanied by a more general deregulation and opening of the economy

true

if a country is to sustain long-term economic growth, the business environment must be conducive to innovations and entrepreneurial activity

true

one of the sources of economies of scale is the ability to spread fixed costs over a large volume

true

other things being equal, a firm should locate its various manufacturing activities where the relative factor costs are conducive to the performance of those activities

true

political turmoil in several African nations has persistently impeded any meaningful progress in economic integration

true

poor product quality and low productivity are hidden costs associated with basing production in a foreign location

true

production is also sometimes referred to as operations as part of a global supply chain

true

products such as electronic components and pharmaceuticals have high value-to-weight ratios

true

property rights can be violated in two ways - through private or public action

true

support activities are always more important than the primary activities in achieving a competitive advantage

true

the current system of foreign exchange is a mixed system of government intervention and speculative activity

true

the implied loss of national sovereignty to the Europe Central Bank underlies the decision by Great Britain, Denmark, and Sweden to stay out of the euro zone for now

true

the international monetary fund's original function was to provide a pool of money from which members could borrow in the short term

true

transaction exposure includes obligations for the purchase or sale of goods and services at previously agreed prices and the borrowing or lending of funds in foreign countries

true

unlike joint ventures, strategic alliances do not require the firm to bear all the costs and risks of foreign expansion

true

what is considered normal business practice in one country may be considered unethical in other countries

true

Hofstede's _____ dimension measured the extent to which different cultures socialized their members into accepting and tolerating ambiguity.

uncertainty avoidance

Cultural myopia refers to a firm's failure to

understand host-country cultural differences

According to the concept of economies of scale, as plant output expands

unit costs decrease

the _____ supply chain includes all of the organizations and resources that are involved in the portion of the supply chain from raw materials to the production facility

upstream

Abstract ideas about what a group believes to be good, right, and desirable is called

values

Compliance to IASB standards is

voluntary

firms pursuing global standardization or transnational strategies tend to prefer ____ arrangements

wholly owned subsidiary

ACSI stands for

American Customer Satisfaction Index

ASEAN is

Association of Southeast Asian Nations

Which of the following observations is consistent with Michael Porter's theory of national competitive advantage?

Factors such as domestic demand and domestic rivalry explain nations' dominance in production.

FCPA stands for

Foreign Corrupt Practices Act

______ trade refers to a situation in which a government does not attempt to influence through quotas or duties what its citizens can buy form another country or what they can produce and sell to another country.

Free

firms pursuing a _________ strategy try not to customize their product offering and marketing strategy to local conditions because customization involves shorter production runs and the duplication of functions, which tend to raise costs

Global Standardization

GNI stands for

Gross National Income

______ per person figures can be misleading because they don't consider differences in the cost of living

Gross national income

Which of the following theories emphasizes the interplay between the proportions in which the factors of production are available in different countries and the proportions in which they are needed for producing particular goods?

Heckscher-Ohlin theory

Firms pursuing an _______ strategy take products first produced for their domestic market and then sell them internationally with only minimal local customization

International

Which of the following was formed in March 2001 to replace the International Accounting Standards Committee (IASC)?

International Accounting Standards Board

IMF stands for

International Monetary Fund

What is an advantage of the geocentric staffing policy?

It enables the firm to build a cadre of international executives who feel at home working in a number of cultures

What is the most important advantage of using a geocentric staffing policy?

It enables the firm to build a cadre of international executives who feel at home working in a number of cultures

what is the primary advantage of licensing?

It helps a firm avoid the development costs and risks associated with opening a foreign market

What is true about the International Monetary Fund?

It is seen as the lender of last resort to nation-states whose economies are in turmoil

Out of the four samples of prominent international market research firms, this firm, _______ is headquartered in London.

Kantar

Modern scientists trace their intellectual roots to ____, although socialist clearly predates this individual

Karl Marx

OECD stands for

Organization for Economic Cooperation and Development

According to the opening case, The Shoprite Group is headquartered in _______

South Africa

_____ totalitarianism is found in the states where political power is monopolized by a party, group, or individual that governs according to religious principles

Theocratic

According to the opening case of chapter 13, Sony's products and services, strategically can be classified into ______ core business segments

12

The most widely practiced religion in the world with some 2.20 billion followers is ________________________.

Christianity

_____________ is the official ethical system of China.

Confucianism

According to chapter 15 opening case, ___________ is the American company that Gazprom allied with

Dow Chemical Company

_____ is required for a business environment to be conducive to innovation and entrepreneurial activity

Strong legal protection of property rights

Which of the following observations about the Foreign Corrupt Practices Act is true?

The act outlawed the paying of bribes to foreign government officials to gain business.